<PAGE>1
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United States
Securities and Exchange Commission
Washington, D. C. 20549
Form 10-Q
_X_ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
OR
___ Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ________________
MCDONNELL DOUGLAS FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-2564584 0-10795
(State or other (I.R.S. Employer (Commission File No.)
jurisdiction of Identification No.)
Incorporation or
Organization)
4060 Lakewood Boulevard, 6th Floor - Long Beach, California 90808-1700
(Address of principal executive offices)
(310) 627-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No ____
Common shares outstanding at November 14, 1995: 50,000 shares
Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
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Table of Contents
Page
Part I Financial Information
Item 1 Financial Statements . . . . . . . . . . . . . . . 3
Item 2 Management's Analysis of Results of Operations * . 8
Part II Other Information
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . 8
Item 2 Changes in Securities **
Item 3 Defaults Upon Senior Securities **
Item 4 Submission of Matters to a Vote of Security Holders **
Item 5 Other Information . . . . . . . . . . . . . . . . 9
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . 11
- --------------
* Management's Analysis of Results of Operations included in lieu of
Management's Discussion and Analysis of Financial Condition and
Results of Operations, which is omitted pursuant to General
Instruction H(1)(a) to Form 10-Q.
** Omitted pursuant to General Instruction H(1)(b) to Form 10-Q
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Part I
Item 1. Financial Statements
McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Balance Sheet
September 30, December 31,
(Dollars in millions, except stated 1995 1994
value and par value amounts)
ASSETS
Financing receivables:
Investment in finance leases $ 1,078.7 $ 1,090.3
Notes receivable 283.7 351.7
1,362.4 1,442.0
Allowance for losses on financing
receivables (42.8) (40.7)
Financing receivables, net 1,319.6 1,401.3
Cash and cash equivalents 10.9 13.1
Equipment under operating leases, net 457.1 374.3
Equipment held for sale or re-lease 6.0 12.1
Accounts with MDC and MDFS 28.8 44.9
Other assets 99.7 83.9
$ 1,922.1 $ 1,929.6
LIABILITIES AND SHAREHOLDER'S EQUITY
Short-term notes payable $ 30.4 $103.8
Accounts payable and accrued expenses 19.4 44.0
Other liabilities 81.3 92.5
Deferred income taxes 308.7 306.1
Long-term debt:
Senior 1,121.9 1,023.8
Subordinated 89.7 87.5
1,651.4 1,657.7
Commitments and contingencies - Note 3
Shareholder's equity:
Preferred stock - no par value; authorized 100,000 shares:
Series A; $5,000 stated value;
authorized, issued and 50.0 50.0
outstanding 10,000 shares
Common stock $100 par value;
authorized 100,000 shares; 5.0 5.0
issued and outstanding 50,000 shares
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<PAGE>4
Capital in excess of par value 89.5 89.5
Income retained for growth 126.2 127.4
270.7 271.9
$ 1,922.1 $1,929.6
See notes to consolidated financial statements.
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McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Statement of Income and Income Retained for Growth
Three months Nine months
ended ended
September 30, September 30,
(Dollars in millions) 1995 1994 1995 1994
OPERATING INCOME
Finance lease income $ 25.8 $ 25.3 $ 78.2 $ 75.5
Interest income on notes 7.0 7.0 21.3 22.4
receivable
Operating lease income, net 10.5 10.2 30.4 30.1
of depreciation expense
Net gain on disposal or re 0.5 2.5 5.3 8.6
-lease of assets
Other 2.1 1.5 6.6 6.2
45.9 46.5 141.8 142.8
EXPENSES
Interest expense 25.3 26.4 76.6 83.2
Provision for losses 3.0 2.1 7.4 5.9
Operating expenses 2.5 3.7 8.5 11.5
Other 2.5 3.0 3.9 6.1
33.3 35.2 96.4 106.7
Income before taxes on income 12.6 11.3 45.4 36.1
Provision for income taxes 4.4 4.2 16.4 13.6
Net income 8.2 7.1 29.0 22.5
Income retained for growth at 127.4 132.3 127.4 129.6
beginning of period
Dividends (9.4) (5.9) (30.2) (18.6)
Income retained for growth at $ 126.2 $ 133.5 $ 126.2 $ 133.5
end of period
See notes to consolidated financial statements.
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McDonnell Douglas Finance Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Nine months ended September 30,
(Dollars in millions) 1995 1994
OPERATING ACTIVITIES
Net income $ 29.0 $ 22.5
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense equipment under 35.6 30.2
operating leases
Net gain on disposal or re-lease of assets (5.3) (8.6)
Provision for losses 7.4 5.9
Change in assets and liabilities:
Accounts with MDC and MDFS 16.1 23.2
Other assets (15.8) 4.5
Accounts payable (25.5) (32.1)
Other liabilities (11.2) 10.7
Deferred income taxes 2.6 1.8
Other, net 5.6 2.5
38.5 60.6
INVESTING ACTIVITIES
Net change in short-term notes and lease 67.5 (25.8)
receivables
Purchase of equipment for operating leases (124.8) (34.2)
Proceeds from disposition of equipment, notes 91.8 60.4
and leases receivable
Collection of notes and leases receivable 83.4 169.1
Acquisition of notes and leases receivable (148.6) (97.5)
(30.7) 72.0
FINANCING ACTIVITIES
Net change in short-term borrowings (73.4) (202.6)
Debt having maturities more than 90 days:
Proceeds 351.5 229.9
Repayments (258.8) (185.2)
Payment of cash dividends (29.3) (17.8)
(10.0) (175.7)
Decrease in cash and cash equivalents (2.2) (43.1)
Cash and cash equivalents at beginning of year 13.1 65.5
Cash and cash equivalents at end of period $ 10.9 $ 22.4
See notes to consolidated financial statements.
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McDonnell Douglas Finance Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation
McDonnell Douglas Finance Corporation (the "Company") is a wholly-owned
subsidiary of McDonnell Douglas Financial Services Corporation, a wholly-owned
subsidiary of McDonnell Douglas Corporation ("MDC"). In the opinion of
management, the accompanying consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) which are necessary to
present fairly the consolidated balance sheet and the related consolidated
statements of income and income retained for growth and cash flows for the
interim periods presented. The statements should be read in conjunction with
the notes to the consolidated financial statements included in the Company's
Form 10-K for the year ended December 31, 1994.
Certain 1994 amounts have been reclassified to conform to the 1995
presentation.
Note 2 - Credit Agreements and Long-Term Debt
The provisions of various credit and debt agreements require the Company to
maintain a minimum net worth, restrict indebtedness, and limit cash dividends
and other distributions. Under the most restrictive provision, $50.7 million
of the Company's income retained for growth was available for dividends at
September 30, 1995.
Note 3 - Commitments and Contingencies
In 1994, certain debtors of the Company commenced actions against the Company
seeking damages in excess of $25.0 million plus punitive damages based on
various contractual and tort claims arising out of financing and loan
agreements. Concurrently, the Company brought actions against the debtors to
collect overdue amounts under the loans provided by the Company. Discovery has
just begun in these actions. At this early stage of the legal proceedings it
is not possible to predict with any certainty the ultimate outcome of these
related legal proceedings. The Company intends to vigorously defend and
prosecute such respective claims. Based on information currently available,
the Company believes it has meritorious defenses to all of the allegations of
wrongdoing and that there will be no material adverse effect on the Company's
earnings, cash flow or financial position.
At September 30, 1995 and December 31, 1994, the Company had commitments to
provide leasing and other financing totaling $342.4 million and $94.4 million.
In conjunction with prior asset dispositions, at September 30, 1995, the
Company was subject to a maximum recourse of $39.5 million. Based on trends to
date, the Company's exposure to such loss is not expected to be significant.
The Company leases aircraft under capital leases which have been subleased to
others. At September 30, 1995, the Company had guaranteed the repayment of
$8.4 million in capital lease obligations associated with a 50% partner.
As part of a restructuring of certain indebtedness and leasehold obligations
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<PAGE>8
of Trans World Airlines, Inc. ("TWA") with its creditors, MDC and the Company
agreed to defer certain payments due from TWA for the period of October 1,
1994 through March 31, 1995. Under this agreement, amounts due to the Company,
aggregating $29.1 million, are to be paid over a 28-month period which
commenced in April 1995. As a result of such payment deferrals, MDC has
increased the aggregate amount of its guaranties of TWA s obligations to the
Company. In August 1995, such agreement was assumed under a prepackaged plan
of reorganization under Chapter 11 of the U.S. bankruptcy laws which was
confirmed by the U.S. Bankruptcy Court. TWA is current on its payments under
its agreement with the Company, but no assurance can be given that TWA will be
able to continue to perform its obligations thereunder.
Item 2. Management's Analysis of Results of Operations
Net gain on disposal or re-lease of assets for the first nine months of 1995
decreased $3.3 million (38.4%) from the first nine months of 1994, primarily
attributable to a $1.3 million gain in 1994 from a sale of an executive jet
within the commercial equipment leasing portfolio and a $1.2 million loss in
1995 due to a prepayment of an aircraft note.
Provision for losses for the first nine months of 1995 increased $1.5 million
(25.4%) from the first nine months of 1994, primarily attributable to one time
write-offs realized in the nine months ended September 30, 1995.
Interest expense for the first nine months of 1995 decreased $6.6 million
(7.9%) from the first nine months of 1994, primarily due to the Company s
refinancing of a portion of its high coupon debt with lower coupon debt.
Operating expenses for the first nine months of 1995 decreased $3.0 million
(26.1%) from the first nine months of 1994, primarily attributable to closing
the offices of McDonnell Douglas Capital Corporation, McDonnell Douglas Bank
Limited and the Company's receivable inventory financing group, and reductions
in the Company's personnel.
Other expenses for the first nine months of 1995 decreased $2.2 million
(36.1%) from the first nine months of 1994, primarily attributable to a 1994
writedown of real estate owned properties.
Part II
Item 1. Legal Proceedings
In 1994, certain debtors of the Company commenced actions against the Company
seeking damages in excess of $25.0 million plus punitive damages based on
various contractual and tort claims arising out of financing and loan
agreements. Concurrently, the Company brought actions against the debtors to
collect overdue amounts under the loans provided by the Company. Discovery has
just begun in these actions. At this early stage of the legal proceedings it
is not possible to predict with any certainty the ultimate outcome of these
related legal proceedings. The Company intends to vigorously defend and
prosecute such respective claims against the Company. Based on information
currently available, the Company believes it has meritorious defenses to all
of the allegations of wrongdoing and that there will be no material adverse
effect on the Company's earnings, cash flow or financial position.
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<PAGE>9
Item 5. Other Information
Information on the Company's portfolio balances; new business volume; analysis
of allowance for losses on financing receivables and credit loss experience;
receivable writeoffs, net of recoveries by business unit; and commercial
aircraft financing are summarized below.
Portfolio Balances
Portfolio balances for the Company's various business segments are summarized
as follows:
September 30, December 31,
1995 1994
(Dollars in millions)
MDC aircraft financing:
Finance leases $ 738.8 $ 748.2
Operating leases 261.9 197.8
Notes receivable 110.5 194.8
1,111.2 1,140.8
Other commercial aircraft
financing:
Finance leases 128.4 125.2
Operating leases 48.0 43.1
Notes receivable 21.3 23.9
197.7 192.2
Commercial equipment leasing:
Finance leases 211.5 216.8
Operating leases 147.1 133.4
Notes receivable 60.0 18.5
Preferred and preference 0.7 0.7
stock
419.3 369.4
Non-core businesses:
Notes receivable 91.3 113.9
$ 1,819.5 $ 1,816.3
New Business Volume
New business volume for the Company's various business segments are summarized
as follows:
Nine months Year ended
ended September 30, December 31,
(Dollars in millions) 1995 1994
MDC aircraft financing $ 134.2 $ 110.0
Other commercial aircraft financing 8.5 7.9
Commercial equipment leasing 124.5 84.1
$ 267.2 $ 202.0
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Analysis of Allowance for Losses on Financing Receivables and Credit Loss
Experience
September 30, December 31,
(Dollars in millions) 1995 1994
Allowance for losses on financing
receivables at beginning of year $ 40.7 $ 35.6
Provision for losses 7.4 9.9
Write-offs, net of recoveries (5.3) (4.9)
Other - 0.1
Allowance for losses on financing
receivables at end of period $ 42.8 $ 40.7
Allowance as percent of total 2.4% 2.2%
portfolio
Net write-offs as percent of average 0.4% 0.3%
portfolio
More than 90 days delinquent:
Amount of delinquent installments $ 4.7 $ 2.8
Total receivables due from $ 28.8 $ 43.2
delinquent obligors
Total receivables due from
delinquent obligors as a 1.6% 2.4%
percentage of total portfolio
Receivable Write-offs, Net of Recoveries by Business Unit
The following table summarizes the loss experience of each of the business
units:
Nine months Year ended
ended December 31,
September 30,
(Dollars in millions) 1995 1994
Commercial aircraft financing $ 2.4 $ (1.9)
Commercial equipment leasing 1.5 2.5
Non-core businesses 1.4 4.3
$ 5.3 $ 4.9
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<PAGE>11
Commercial Aircraft Financing
As part of a restructuring of certain indebtedness and leasehold obligations
of TWA with its creditors, MDC and the Company agreed to defer certain
payments due from TWA for the period of October 1, 1994 through March 31,
1995. Under this agreement, amounts due to the Company, aggregating $29.1
million, are to be paid over a 28-month period which commenced in April 1995.
As a result of such payment deferrals, MDC has increased the aggregate amount
of its guaranties of TWA s obligations to the Company. In August 1995, such
agreement was assumed under a prepackaged plan of reorganization under Chapter
11 of the U.S. bankruptcy laws which was confirmed by the U.S. Bankruptcy
Court. TWA is current on its payments under its agreement with the Company,
but no assurance can be given that TWA will be able to continue to perform its
obligations thereunder.
Borrowing Operations
In October 1995, Moody s Investors Service Inc. upgraded its rating of the
Company's senior debt to Baa2 from Baa3, subordinated debt to Baa3 from Ba2,
and short-term debt rating for commercial paper to Prime-2 from Prime-3.
In November 1995, Standard & Poor s ("S&P") placed the Company s BBB rated
senior debt and BBB- rated subordinated debt on CreditWatch with positive
implications and S&P also affirmed its A-2 rating of the Company s commercial
paper.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 10 - Amendment No. 1, dated as of August 31, 1995, to Credit
Agreement, dated as of September 29, 1994, among the Company, MDFS and the
banks listed therein.
Exhibit 12 - Computation of ratio of income to fixed charges.
Exhibit 27 Financial Data Schedule.
B. Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, its principal financial officer, thereunto duly authorized.
McDonnell Douglas Finance Corporation
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November 14, 1995 /s/ Steven W. Vogeding
__________________________________
Steven W. Vogeding
Vice President and Chief Financial
Officer (Principal Financial Officer) and
Registrant's Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,900
<SECURITIES> 0
<RECEIVABLES> 283,700
<ALLOWANCES> (42,800)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,922,100
<CURRENT-LIABILITIES> 0
<BONDS> 1,211,600
<COMMON> 5,000
0
50,000
<OTHER-SE> 215,700
<TOTAL-LIABILITY-AND-EQUITY> 1,922,100
<SALES> 0
<TOTAL-REVENUES> 141,800
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,900
<LOSS-PROVISION> 7,400
<INTEREST-EXPENSE> 76,600
<INCOME-PRETAX> 45,400
<INCOME-TAX> 16,400
<INCOME-CONTINUING> 29,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>1
EXHIBIT 10
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT No. 1 dated as of August 31, 1995 to the $220,000,000 Credit
Agreement dated as of September 29, 1994 (the "Agreement") among MCDONNELL
DOUGLAS FINANCE CORPORATION, MCDONNELL DOUGLAS FINANCIAL SERVICES CORPORATION,
the BANKS party thereto and THE CHASE MANHATTAN BANK, N.A., and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agents.
WHEREAS, the parties hereto desire to amend the Agreement to (i)
extend the Termination Date from September 28, 1998 to August 30, 1999, (ii)
reduce certain interest rates and Commitment Fee Rates and (iii) make certain
other changes as hereinafter provided;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement has
the meaning assigned to such term in the Agreement. Each reference to
"hereof," "hereunder," "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the Amendment Effective Date
(as defined in Section 10 hereof) refer to the Agreement as amended hereby.
SECTION 2. AMENDMENT OF DEFINITIONS. Section 1.01 of the Agreement is
amended as follows:
(a) The definition of "Company's 1993 Form 10-K" is deleted and
replaced by the following new definition:
"Company's 1994 Form 10-K" means the Company's annual report on Form
10-K for 1994, as filed with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934.
(b) The definition of Termination Date is amended by changing the
date specified therein from "September 28, 1998" to "August 30, 1999."
SECTION 3. VALIDITY OF GUARANTY.
(a) The following new Section 2.14 is added at the end of Article II
of the Agreement:
Section 2.14. ACTUAL OR ASSERTED INVALIDITY OF GUARANTY OF
OBLIGATIONS OF MDFS. If at any time the guaranty by the Company of all
amounts payable by MDFS under its Notes or this Agreement, as set forth in
Article IX hereof, shall cease to be in full force and effect or any Person
acting on behalf of the Company or any of its Affiliates shall so assert in
writing or such person shall assert in writing that all or any portion of any
payment by the Company pursuant thereto is or would, if made, be subject to
avoidance under the provisions of any applicable law relating to fraudulent
conveyances, fraudulent transfers or preferential payments, (i) MDFS shall not
thereafter be entitled to borrow any amount pursuant to Section 2.01 or 2.02
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<PAGE>2
and (ii) the Notes of MDFS (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by MDFS.
(b) The term "MDFS" is replaced by the words ", subject to
Section 2.14, MDFS" wherever such term appears in Sections 2.01
and 2.02 of the Agreement.
SECTION 4. REFERENCES TO FINANCIAL STATEMENTS AND REPORTS. The
following changes are made to update references to financial statements and
reports filed on Forms 10-K and 10-Q:
(a) The date "December 31, 1993" is changed to "December 31, 1994"
wherever it appears in Sections 4.04(a) and 4.11 of the Agreement.
(b) The date "June 30, 1994" is changed to "March 31, 1995"
wherever it appears in Sections 4.04(b) and 4.04(c) of the Agreement.
(c) The terms "six months" and "six-month period," respectively, are
replaced by the words "three months" and "three-month period," respectively,
wherever such terms appear in Section 4.04(b) of the Agreement.
(d) The term "Company's 1993 Form 10-K" is changed to "Company's 1994
Form 10-K" in Section 4.04(a) of the Agreement.
(e) The words ", the Company's reports on Form 10-Q for its fiscal
quarters ended March 31, 1994 and June 30, 1994," are replaced by the words
"and the Company's report on Form 10-Q for its fiscal quarter ended March 31,
1995," in Section 4.11 of the Agreement.
SECTION 5. INCREASE PERMITTED LIEN BASKET. Section 5.12(a)(1) is
amended by changing the words "20% of Net Tangible Assets" to "50% of Net
Tangible Assets."
SECTION 6. AMENDMENT OF PRICING SCHEDULE. The Pricing Schedule is
amended by replacing it with the new pricing schedule attached to this
Amendment No. 1. For each day on and after the Amendment Effective Date (as
defined in Section 10 hereof), the LIBOR Margin and Commitment Fee Rate
shall be the applicable rates set forth in such new pricing schedule. For
each day before the Amendment Effective Date, the LIBOR Margin and Commitment
Fee Rate shall be the applicable rates set forth in the Pricing Schedule then
in effect.
SECTION 7. CONFIRMATION OF AGREEMENT. Except as modified or amended
in this Amendment No. 1, all terms and conditions in the Agreement remain in
full force and effect and are hereby ratified and confirmed.
SECTION 8. GOVERNING LAW. This Amendment No. 1 shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 9. COUNTERPARTS. This Amendment No. 1 may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
<PAGE>
<PAGE>3
SECTION 10. EFFECTIVENESS. The amendment of the Agreement provided
for herein shall become effective on the date (the "Amendment Effective Date")
when the Documentation Agent shall have received:
(a) counterparts hereof signed by the Borrowers and each Bank (or
telegraphic, telex, facsimile or other written confirmation from such parties,
in form satisfactory to the Documentation Agent, confirming that such parties
have executed counterparts hereof);
(b) a certificate, dated the Amendment Effective Date, signed by a
principal financial officer of the Company, to the effect that (i) no Default
shall have occurred and be continuing on the Amendment Effective Date and (ii)
each of the representations and warranties contained in the Agreement as
amended by this Amendment No. 1 is true on and as of the Amendment Effective
Date;
(c) an opinion of John O'Connor, counsel for the Borrowers,
substantially in the form of Exhibit A hereto; and
(d) all documents that the Documentation Agent may reasonably request
relating to the existence of the Borrowers, the corporate authority for and
the validity of this Amendment No. 1 and any other matters relevant hereto,
all in form and substance satisfactory to the Documentation Agent.
<PAGE>
<PAGE>4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
MCDONNELL DOUGLAS FINANCE CORPORATION,
By /s/ Phillip B. Dandridge
--------------------------
Title: Treasurer
MCDONNELL DOUGLAS FINANCIAL SERVICES
CORPORATION
By /s/ Thomas J. Lawlor Jr.
---------------------------
Title: Chief Financial Officer
<PAGE>
<PAGE>5
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Diana H. Imhof
----------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Robert J. Louk
------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By /s/ Matthew H. Massie
-------------------------
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LTD
By /s/ Toshinari Iyoda
--------------------------
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Lori Y. Kannegieter
--------------------------
Title: Vice President
BANK OF MONTREAL
By /s/ Gerald L. Hughes
---------------------------
Title: Director
<PAGE>
<PAGE>6
CHEMICAL BANK
By /s/ James B. Treger
-------------------------
Title: Vice President
NATIONAL WESTMINSTER BANK PLC
By /s/ Robert Buck
-------------------------
Title: Assistant Director
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Karen J. Andrews
--------------------------
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By /s/ Motokazu Uematsu
---------------------------
Title: Deputy General Manager
<PAGE>
<PAGE>7
PRICING SCHEDULE
The "LIBOR Margin" and "Commitment Fee Rate" for any day are the
respective percentages set forth below in the applicable row under the column
corresponding to the Status and Usage that exists on such day:
=============================================================
Level Level Level Level Level Level
Status I II III IV V VI
- -------------------------------------------------------------
LIBOR
Margin:
Usage less 0.25% 0.30% 0.35% 0.425% 0.5375% 0.625%
than or
equal to 50%
Usage more 0.25% 0.30% 0.35% 0.425% 0.5875% 0.75%
than 50%
Commitment 0.08% 0.10% 0.125% 0.15% 0.225% 0.25%
Fee Rate
=============================================================
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Company's
long-term debt is rated A or higher by S&P or A2 or higher by Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated A- or higher by S&P or A3 or higher by
Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by
Moody's and (ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated BBB or higher by S&P or Baa2 or higher by
Moody's and (ii) none of Level I Status, Level II Status and Level III Status
exists.
"Level V Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated BBB- or higher by S&P or Baa3 or higher by
Moody's and (ii) none of Level I Status, Level II Status, Level III Status or
Level IV Status exists.
"Level VI Status" exists at any date if, at such date, no other Status
exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard and Poor's Ratings Group.
<PAGE>
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"Status" means, at any date, whichever of Level I Status, Level II
Status, Level III Status, Level IV Status, Level V Status or Level VI Status
exists at such date.
"Usage" means at any date the percentage equivalent of a fraction (i)
the numerator of which is the aggregate outstanding principal amount of the
Syndicated Loans and Swingline Loans at such date, after giving effect to any
borrowing or payment on such date, and (ii) the denominator of which is the
aggregate amount of the Syndicated Commitments at such date, after giving
effect to any reduction of the Syndicated Commitments on such date. For
purposes of this Schedule, if for any reason any Loans remain outstanding
after termination of the Commitments, the Usage for each date on or after the
date of such termination shall be deemed to be greater than 50%.
The credit ratings to be utilized for purposes of determining a
Status are the publicly announced ratings assigned to unsecured senior
obligations of the Company without third party credit support (the "Long-Term
Securities"). Ratings assigned to any obligation which is secured or which
has the benefit of third party credit support shall be disregarded.
Notwithstanding the foregoing two sentences, if the obligations of the Company
under this Agreement and its Notes are hereafter secured or entitled to the
benefit of any third party credit support, then the credit ratings utilized in
determining a Status shall, if the Company so requests by written notice to
the Documentation Agent, be the ratings assigned to any other senior
obligations of the Company that are secured by the same collateral or entitled
to the benefit of the same third party credit support, in each case equally
and ratably with the obligations of the Company under this Agreement and the
Notes (and such obligations shall be "Long-Term Securities" for purposes of
the next succeeding paragraph).
For purposes of determining Status, if at any date the rating of the
Long-Term Securities by Moody's shall be higher or lower than the comparable
rating by S&P by two or more rating levels (it being understood that for these
purposes an S&P rating of A+ is comparable to a Moody's rating of A1, an S&P
rating of A is comparable to a Moody's rating of A2, and so forth), then the
rating of the Long-Term Securities by each of Moody's and S&P shall be deemed
to be one rating level above the lower of the two actual ratings.
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EXHIBIT 12
McDonnell Douglas Finance Corporation and Subsidiaries
Computation of Ratio of Income to Fixed Charges
Nine months ended
September 30,
(Dollars in millions) 1995 1994
Income:
Income before taxes on income $ 45.4 $ 36.1
Fixed charges 79.2 85.8
Income before taxes on income and fixed $ 124.6 $ 121.9
charges
Fixed charges:
Interest expense $ 76.6 $ 83.2
Preferred stock cash dividends 2.6 2.6
$ 79.2 $ 85.8
Ratio of income before taxes on income
and fixed charges to fixed charges 1.57 1.42
